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Every economy is different and every central bank is different. We don’t have too many recent cases of 10-year government yields dipping below 1%, but there are two—Japan and Switzerland. These two sub-1% rate drops happened for completely different reasons. In Japan, there was a busted credit bubble and a busted banking system that led to a real estate decline that fed on itself. Even though the Japanese have tried to fix their banks, negative demographics and a persistent 15-year deflation, as well as a debt-to-GDP ratio more than double that of the US, have resulted in a dead real estate market. There are not too many Japanese trying to do a triple-house flip, despite their much lower interest rates (see chart below).

In Switzerland, the sub-1% decline was driven by safe-haven buying based on fears of the dissolution of the euro. The euro storm has calmed down and the Swiss 10-year government bond yield has risen to the glorious level of 1.1%, but all is not well in Europe and it is difficult to say how long the euro mess will stay dormant. Still, Switzerland is a banking center where capital hides, so its interest rate structure likely reflects more than the local economic dynamics. My point is: Even if US Treasury yields fall below their record 2012 levels, I don’t think that such an event can push the real estate market significantly higher.